'Tis the season to be portly

To offset a rise in production costs, the trade's best performer in fortified wine will need to be even more stout and impressive this Christmas, says Graham Holter

Port season is approaching

and, although producers say they are bullish about their Christmas sales prospects, it's not difficult to detect a certain nervousness. In a year when production costs have soared and price rises proved necessary, supermarkets are sharpening their axes in preparation for what some believe could be the bloodiest festive season for years - in discounting terms, of course.

"Over 80% of port is sold through supermarkets," points out Adrian Bridge, managing director of the Fladgate Partnership, which makes Taylor's, Fonseca, Croft and Delaforce. "How the supermarkets use port this Christmas will decide, to a certain extent, how well it does. They've quite often used a strong brand as a vehicle to improve footfall and have been prepared to sacrifice their margins. If that happens this year there could be some tough conditions."

Bout of sterling v euro

Steve Moody, sales and marketing director at Fells, the UK arm of Symington Family Estates (the name behind Graham's, Warre and Dow), explains the problems facing port producers.

"The single biggest challenge is the issue of exchange rates

- sterling versus the euro - there's a figure of about 18% that's gone astray that needs to be recovered, and it's a very difficult time just because of that," he says. "There's also the increase in energy costs and glass, general inflationary costs and the price of grape brandy has gone up between 40% and 60%. That's partly to do with a shortage of fruit set aside and partly due to the gradual withdrawal of EU subsidies.

"We have passed on the cost of goods increases, on many of our brands, to the whole

market, and that has resulted in price increases."

Port, Moody says, has been caught up in a wider supermarket battle. "There ha s been half-price and high-low promotional activity. The climate still exists where

retailers are prepared to invest their margin as they try to increase footfall, so there's every possibility that port could be treated as it has been in recent years."

This makes port great value, but Fells finds the scenario "concerning".

Bridge and Moody are both keen to point out that, despite its challenges, port is doing reasonably well: value was up 2% and volumes were steady in the year to Aug 9, according to Nielsen, while the likes of sherry, Montilla and fortified British wine saw declines.

"We've seen in the past that port tends to be fairly robust," says Bridge. "Right now we're solid in terms of total volume, but it's been the only fortified that's been growing for a number of years. Value is up a touch, though it's absolutely true that's largely down to duty increases.

"We've had to raise prices this year because of the rising cost of grapes and sterling, all coupled with duty. I don't think the supermarkets will be able to discount as deeply as in recent years."

One of the key battlegrounds is

late -bottled vintage. It's also one of the most controversial. Selling LBV for less than £10 raised eyebrows even several years ago - despite the cost pressures, it will almost certainly be available as cheaply this Christmas.

"We try to avoid talking price with supermarkets, but we have a strong understanding of how consumers shop the category," says Bridge. " There's been a trend towards people trading up. It may be that we put in some promotional activity to allow people to buy LBV below £10, but our overall strategy is to trade people up. People may buy less volume but treat themselves to a better single bottle."

Moody sees things differently. "The true cost component of any quality LBV would really suggest that the retail positioning should be above £10, there's no doubt about that at all," he says.

"We're trying to spend a lot of money to add value. Graham's LBV has a £250,000 ad campaign in the Times and Telegraph and we're the only port advertising in that way. That should be

a sign of confidence in our business. There are gift cartons for Graham LBV and Warre's Otima and our bottle-matured and single quintas are being packaged in wooden boxes ."

Image is everything

Fladgate has attempted to innovate with the launch of Croft Pink, which apparently enjoyed a successful summer in Sainsbury's. Beam Global has played its part, investing £2 million in a more contemporary look for Cockburn's and a campaign which encourages consumers to abandon all their port prejudices - it may be the first time port has been advocated with swordfish and chorizo.

Rozès has launched its Colours Collection: Ruby Reserve in a bright red bottle, Reserve White in a white bottle and a 10 Year Old in a gold bottle. Colin Cameron of UK distributor Percy Fox says: "Port has plateaued, and in a market where there is little dynamism it is more difficult for new entrants to gain visibility.



at the value end of the market where strong discounting is used to drive sales .

"Port is too reliant on Christmas . The challenge

the category faces is how to broaden the appeal of port to occasions throughout the year

- and to a younger audience."

A retail perspective

Chris Connolly, Connolly's

Wine Merchants, Birmingham

"I'm quite confident that, as we get closer to Christmas, port will do very well. Throughout the rest of the year it's no more than a steady trickle. It's not booming by any stretch of the imagination - it ticks over, just about.

"At Christmas we will do some packs like port and

stilton. We sell the occasional few bottles or a case for christenings and so on.

"Comparatively speaking it's seriously under-priced. You can get a really good vintage port for £40 or £50 a bottle. The equivalent quality wine from anywhere else in the world, from the best estates in Bordeaux or Burgundy, would be hundreds of pounds."

So why isn't port booming? "I think it's a fashion thing as much as anything else. Maybe it's partly a health thing. By the time people get to that stage in the meal they're saying maybe I shouldn't have any more, especially a glass of port that may really send me over the edge.

"I often feel sorry for port producers. They spend so much time and energy making this fantastic drink and when it's served people have already had a glass or two of Champagne, red wine, white wine ... by that time a lot of people are in no state to appreciate it.

"Most of what's there, aside from the very old wines I buy as and when from brokers, has mostly been bought on release. It's a historic thing and maybe we ought to think, do we really want this? Are we just tying up a lot of money in stock that will just gather dust?"

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